On Thursday, March 11, 2021 the American Rescue Plan Act (ARPA) of 2021 was signed into law. The purpose of this legislation was, in part, to provide additional COVID-19 relief to individuals. ARPA contains several provisions that impact employee benefits, including COBRA subsidies for certain individuals and a temporary increase in the maximum contribution amount to a Dependent Care FSA for 2021.
ARPA creates a 100% COBRA premium subsidy for certain assistance eligible individuals (AIEs) who lost group health plan coverage due to involuntary termination or reduction of hours. The subsidy period begins April 1, 2021 and ends September 30, 2021. The subsidy period may end prior to September 30, 2021 for any qualified beneficiaries who:
• reach their maximum COBRA coverage period before September 30, 2021
• become eligible for another group health plan
• become eligible for Medicare
Dependent Care FSA Limit Temporarily Increased
ARPA temporarily increased the maximum Dependent Care FSA benefit that can be excluded from income for taxable years beginning in 2021. The maximum amount is increased from $5,000 to $10,500 or, for married taxpayers filing separately, the maximum has been increased from $2,500 to $5,250. This temporary increase is optional and requires a Plan amendment. Plan amendments can be retroactive and must be adopted by the end of the plan year to which they apply.
Please note that this is new legislation. DBS is reviewing it and will provide additional guidance as it becomes available.